Trump tariffs v2.0 Update
trade-wars
The trade war is on: Canada gets a preferential 10% rate on energy given US reliance on Canadian crude, while Mexico still faces the full 25%.
With the tariffs now in effect, the picture has shifted: Mexico still faces a flat 25% duty, but Canada gets a preferential structure — 10% on energy imports and 25% on everything else — reflecting how dependent the US is on Canadian crude oil. Under this modified approach, modelled Canadian export losses improve from -23.9% to -20.4% in the no-retaliation scenario, though the piece stresses the trade war still carries substantial welfare costs for all sides if retaliation follows.
Originally published on Substack, February 2, 2025.